June 26, 2013

In a 5-4 ruling dated June 26, 2013, the United States Supreme Court justices strike down the Defense of Marriage Act, saying it is unconstitutional.

The Supreme Court case U.S. v. Windsor, ruling said that New York’s decision to authorize gay marriage was a proper exercise of its authority, and reflected, “the community’s considered perspective on the historical roots of the institution of marriage and its evolving understanding of the meaning of equality.”

What this means is that gay couples who are married will be recognized on the federal level, regardless of their state of residence. So for those couples who have married in a state where gay marriage is lawful, and return to a home state that does not allow for gay marriage, they will now have the same federal tax, retirement contribution, health insurance and estate plan benefits of those heterosexual couples who have married.

As an estate and family law attorney, this decision resonates with me for my clients who will now enjoy the same rights and privileges concerning tax and estate planning as every other straight married couple.

The ruling of the Supreme Court has many gay couples rejoicing, and the public at large, who seems now narrowly in favor of gay marriage at 53% in a poll conducted by NBC News and The Wall Street Journal, applauding and cheering.

In the time to come, the far reaching effects of this decision will be developed, but for today, married gay couples can rest assured that they will be afforded the same federal benefits as straight couples, and they can consider revisions to the current financial and estate plans, consistent with the protections now guaranteed to them by this decision.

While most requests to a trustee of a special needs trust
are probably going to be appropriate, such as payment of unreimbursed medical
expenses, clothing, furnishings, etc., there are several areas that are always
potentially problematic for both the beneficiary and the trustee.

The trustee must make a decision whether the expenditure is
not only appropriate, but whether it is going to be one that must be reported
to the Social Security Administration if the beneficiary of the trust is
receiving governmental benefits such as Supplemental Security Income (SSI). If
so, then the amount that is used must be reported, and this could have the
effect of reducing the next monthly payment.

One of the problem areas is the purchase of a vehicle. The
mere purchase of a car is probably not going to be acceptable if it is not for
the sole benefit of the individual, as others could be using it for themselves,
and it is the case in many situations that the beneficiary will not be driving
the vehicle.

However, the purchase of a van could be a considerable
expense, especially if the van needs to be handicap-equipped with a lift and
other necessary features that allow the beneficiary to utilize it. The purchase
must usually be qualified to enhance the quality of life of the individual, but
the trustee must determine whether it is prudent to use the funds of the trust
for this purchase.

One of the major issues at the time of the request for the
van purchase is the amount of money in the trust and the value or cost of the
van. If the van is likely to consume a considerable percentage of the value of
the trust, then it may not be an appropriate purchase. Perhaps there are
options, such as obtaining a used van or paying for transportation when
necessary, be it cab fare, vans, or other forms of transportation for the beneficiary.

Of course, in addition to the cost of the purchase of the van,
there are also added costs, such as tax, insurance, maintenance, gasoline, and
repairs if the car is not under warranty. In some cases, it may not be
appropriate for the trust to own the car, but perhaps it should be owned by a
family member, with the trust being the lien holder, such that the person
owning the vehicle is borrowing money from the trust to pay for the vehicle.

Another hot topic has been the use of trust funds for travel
for non-beneficiaries. The Social Security Administration issued a revised Program
Operation Manual (POM) that stated that some trusts would not be permitted to
pay for travel expenses incurred by non-beneficiaries. This is a problematic
area since some disabled beneficiaries would not be able to make trips, take
vacations, or travel to visit other relatives without having at least one paid
companion to be with them at all times. Therefore, the revised regulation
stated that the expenditure will not violate the so-called sole benefit rule if
used by third parties for goods and services received by the beneficiary,
payment of third party travel, “which is necessary in order for the trust
beneficiary to obtain medical treatment,” or payments that allow a third party
to “visit a trust beneficiary who resides in an institution, nursing home, or
other long-term care facility (e.g., group homes and assisted living
facilities) or other supported living arrangement in which a non-family member
or entity is being paid to provide or oversee the individual’s living
arrangement.”

This basically means that the travel must be for the purpose
of ensuring the safety and/or medical well-being of the individual.

There are several areas that still remain to be clarified,
such as what is reasonable compensation for the expenditures of the beneficiary
and/or family. There is also a “reasonable” test, such as what compensation is
reasonable to be paid to the trustee to manage the trust, as well as other
“reasonable fees and costs for investment, legal, accounting, and other
services for the beneficiary.”

One must keep in mind that the trust has been established to
create an exception so that the beneficiary continues to qualify for all
governmental benefits, and the trustee does not want to run afoul of the rules,
which are known as the “sole benefit” rules, which means that the funds in the
trust must be used only for the benefit of the primary beneficiary, without the
regard for the remaindermen.

Nevertheless, in these first party trusts, which have been
created with the money of the beneficiary so that the beneficiary continues to
qualify for governmental benefits, there is a payback to the state for the
amount paid by the state for the care of the individual, so the government wants
to be sure that the funds are being spent prudently and not frivolously or
otherwise, which could possibly reduce the payback amount.

June 19, 2013

Some people like to keep things like old bank statements,
electric bills, etc., and some are people throw them away as fast as they
receive them. I recently started to clean my basement and found records going
back some thirty years. While I am certainly not a hoarder, I do have lots of clutter
that must be dealt with.

Clutter can make a difficult time ever more so if you should
happen to pass away without first dealing with it. What a mess you would leave
for your family. The following is a short synopsis and guide as to what to keep
and what to toss or shred.

Records to keep:

Legal records, including wills, life insurance policies
should be retained indefinitely, as well as information regarding the purchase
or sale of a home, second home, timeshare, etc., as you will need them to
determine the tax basis or cost of such assets, so that when they are sold, you
or your heirs will not be paying excess capital gains tax. These records should
be in a separate box and clearly marked “do not destroy,” but once the assets
are sold and the statute of limitations has run on the government being able to
audit or review the return, then they may be destroyed. Some people like to
keep their deeds and mortgages for posterity, and some people actually frame
their old deeds and mortgages for decoration, as many of them were colorful or
handwritten with a fountain pen.

Tax returns, investment statements, 1099 Forms, W-2s, etc.
should be kept for seven years, as the IRS has several years to audit a return
once it has been filed. It is also normally good to keep records of stock purchases
and sales in the event of a review by tax authorities. Such financial documents
are also important to retain in the event that you need long-term care, as
often the Medicaid office will request bank records and tax returns for five
years prior to you requesting such assistance. If the records do not exist, you
may be required to purchase them from the bank or financial institution, and
this could be somewhat expensive and time consuming.

Pay stubs, credit card bills, bank statements, etc, are
probably necessary to save for only one year, although if the records have to
do with taxes, they should be kept for seven years. Most credit card companies,
utilities, and banks have records available relatively easily, (although there
may be a fee imposed for them), but they are available nonetheless. A problem may
arise when a bank is acquired by another bank, and the acquiring bank must keep
these records for some period of time, but they usually do not keep them any
longer than the required seven years. The same is true of brokerage firms and
utilities that are being acquired, merged, or sold.

It may be helpful to label the box that is holding these
records so that when you place the 2013 records in your storage, you can then
remove the box from 2006 and have those records shredded. In this manner, you
never have more than seven years records at a time, and you are continuously purging
the old records as you replace the most recent year in the storage area.